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UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
SECURITIES EXCHANGE ACT OF 1934
RELEASE NO. 38500 / April 14, 1997
AMINISTRATIVE PROCEEDING
File No. 3-9103
---------------------------------
:
In the Matter of :
: ORDER MAKING FINDINGS
H. RALPH SYLVESTER, DONALD : AND IMPOSING REMEDIAL
R. KRUEGER and JOHN C. HAWVER, : SANCTIONS AGAINST
: H. RALPH SYLVESTER AND
Respondents. : DONALD R. KRUEGER
:
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I.
In this public administrative proceeding ordered pursuant to
Sections 15(b)(6) and 19(h) of the Securities Exchange Act of
1934 ("Exchange Act"), Respondents H. Ralph Sylvester
("Sylvester") and Donald R. Krueger ("Krueger") have submitted
Offers of Settlement, which the Commission has determined to
accept.1 Solely for the purpose of these proceedings and any
other proceedings brought by or on behalf of the Commission or in
which the Commission is a party, and without admitting or denying
the findings contained in this Order, except for those facts
which are set forth in paragraphs II.1., II.2. and III.3. below,
which they admit, Sylvester and Krueger consent to the entry of
this Order.
II.
On the basis of this Order, the Order Instituting Public
Administrative Proceedings in this matter and the Offers of
Settlement submitted by Sylvester and Krueger, the Commission
finds2 that:
1 The Order Instituting Proceedings in this matter was issued
on September 26, 1996. Exchange Act Release No. 37733 (Sept. 26,
1996).
2 The findings herein are made pursuant to Sylvester's and
Krueger's offers and are not binding on any other person or
entity named as a respondent in this or any other proceeding.
1. On September 28, 1994, the Commission filed an
action against Sylvester, Krueger and others captioned Securities
and Exchange Commission v. Michael J. Randy, et al, Civil Action
No. 94 C 5902, in the United States District Court for the
Northern District of Illinois, Eastern Division. On August 7,
1996, Final Judgments of Permanent Injunction were entered
against Sylvester and Krueger, by default, permanently enjoining
them from, directly or indirectly, violating Sections 5(a), 5(c),
17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933
("Securities Act"), Sections 10(b) and 15(a)(1) of the Exchange
Act and Rule 10b-5 promulgated thereunder.
2. From August 1979 through April 1992, Krueger was a
registered representative associated with various broker-dealers,
most recently with Investors Choice Securities.
3. From at least February 1992 through December 1992,
Sylvester acted as a broker-dealer within the meaning of Section
15(b) of the Exchange Act in connection with the sale of Canadian
Trade Bank, Ltd. certificates of deposit ("CTB CDs").
4.a. From at least February 1992 to December 1992,
Sylvester willfully violated Section 17(a) of the Securities Act
in that, in the offer or sale of securities, by the use of the
means or instruments of transportation or communication in
interstate commerce or by the use of the mails, directly or
indirectly, he employed devices, schemes or artifices to defraud;
obtained money or property by means of untrue statements of
material facts or omitted to state material facts necessary in
order to make the statements made, in light of the circumstances
under which they were made, not misleading; or engaged in
transactions, practices, or courses of business which operated or
would operate as a fraud or deceit upon the purchaser.
As part of this conduct, Sylvester and his agents,
in the offer and sale of CTB CDs, misrepresented material facts
and omitted to state material facts to investors concerning the
legitimacy of CTB, the safety of the investment and the use of
proceeds. Specifically, Sylvester misrepresented to investors
that the CDs were guaranteed to pay 12-14% annual interest; the
CDs were safe investments and were fully insured by independent
insurance companies, including Lloyds of London, Polaris, and
Zurich American, that maintained $150 in reserve for every $100
on deposit; CTB maintained $100 in reserve for every $100 on
deposit; CTB was audited five times per year, one being a
surprise audit, by "a Government Banking Commission;" CTB used
investor funds to purchase "only major national government bonds,
such as U.S., German, British, Japanese, Australian, and other
major nations of short duration [sic] and short term bonds of
major AA rated or better corporations;" and investors in the CDs
included foreign royalty, governments and other banks. In
addition to these misrepresentations, Sylvester and his agents
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failed to disclose that CTB was not a bank and was not legally
licensed as a bank by any governmental agency and that an
individual performed substantially all activities relating to CTB
out of his offices in Illinois. Sylvester sold over $1.7 million
worth of the CTB CDs to at least 74 investors from which he
personally received over $24,000 in commissions.
b. From at least September 1992 to December 1992,
Krueger willfully violated Section 17(a) of the Securities Act in
that, in the offer or sale of securities, by the use of the means
or instruments of transportation or communication in interstate
commerce or by the use of the mails, directly or indirectly, he
employed devices, schemes or artifices to defraud; obtained money
or property by means of untrue statements of material facts or
omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they
were made, not misleading; or engaged in transactions, practices,
or courses of business which operated or would operate as a fraud
or deceit upon the purchaser.
As part of this conduct, Krueger and his agents,
in the offer and sale of CTB CDs, misrepresented material facts
and omitted to state material facts to investors concerning the
legitimacy of CTB, the safety of the investment and the use of
proceeds. Specifically, Krueger misrepresented to investors that
the CDs were guaranteed to pay 12-14% annual interest; the CDs
were safe investments and were fully insured by independent
insurance companies, including Lloyds of London, Polaris, and
Zurich American, that maintained $150 in reserve for every $100
on deposit; CTB maintained $100 in reserve for every $100 on
deposit; CTB was audited five times per year, one being a
surprise audit, by "a Government Banking Commission;" CTB used
investor funds to purchase "only major national government bonds,
such as U.S., German, British, Japanese, Australian, and other
major nations of short duration [sic] and short term bonds of
major AA rated or better corporations;" investors in the CDs
included foreign royalty, governments and other banks; and a
Canadian trust company would invest depositor funds outside of
the United States by purchasing mortgages. In addition to these
misrepresentations, Krueger and his agents failed to disclose
that CTB was not a bank and was not legally licensed as a bank by
any governmental agency and that an individual performed
substantially all activities relating to CTB out of his offices
in Illinois. Krueger sold over $530,000 worth of the CTB CDs to
at least 27 investors from which he personally received over
$11,000 in commissions.
5.a. From at least February 1992 to December 1992,
Sylvester willfully violated Section 10(b) of the Exchange Act
and Rule 10b-5 thereunder in that, directly or indirectly, by the
use of the means or instrumentalities of interstate commerce, or
of the mails, in connection with the purchase or sale of
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securities, he employed devices, schemes or artifices to defraud;
made untrue statements of material facts or omitted to state
material facts necessary in order to make the statements made, in
light of the circumstances under which they were made, not
misleading; or engaged in acts, practices or courses of business
which operated or would operate as a fraud or deceit.
As part of this conduct, Sylvester engaged in the
activities described in paragraph II.4.a. above.
b. From at least September 1992 to December 1992,
Krueger willfully violated Section 10(b) of the Exchange Act and
Rule 10b-5 thereunder in that, directly or indirectly, by the use
of the means or instrumentalities of interstate commerce, or of
the mails, in connection with the purchase or sale of securities,
he employed devices, schemes or artifices to defraud; made untrue
statements of material facts or omitted to state material facts
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading; or
engaged in acts, practices or courses of business which operated
or would operate as a fraud or deceit.
As part of this conduct, Krueger engaged in the
activities described in paragraph II.4.b. above.
6.a. From at least February 1992 to December 1992,
Sylvester willfully violated Section 15(a) of the Exchange Act in
that he made use of the mails or means or instrumentalities of
interstate commerce to effect transactions in or induced the
purchase of securities without being registered as a broker or
dealer in accordance with Section 15(b) of the Exchange Act.
As part of this conduct, Sylvester effected
transactions in and induced the purchase of CTB CDs without being
registered as a broker or dealer in accordance with Section 15(b)
of the Exchange Act.
b. From at least September 1992 to December 1992,
Krueger willfully violated Section 15(a) of the Exchange Act in
that he made use of the mails or means or instrumentalities of
interstate commerce to effect transactions in or induced the
purchase of securities without being registered as a broker or
dealer in accordance with Section 15(b) of the Exchange Act.
As part of this conduct, Krueger effected
transactions in and induced the purchase of CTB CDs without being
registered as a broker or dealer in accordance with Section 15(b)
of the Exchange Act.
7.a. From at least February 1992 to December 1992,
Sylvester willfully violated Section 5(a) of the Securities Act
in that, directly or indirectly, he made use of the means or
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instruments of transportation or communication in interstate
commerce or of the mails, through the use or medium of a
prospectus or otherwise, to sell securities or carried or caused
to be carried through the mails or interstate commerce, by the
means or instruments of transportation, securities, for the
purpose of sale or delivery after sale, without a registration
statement being in effect with respect to such securities or
while no exemption from registration was applicable.
As part of this conduct, Sylvester sold CTB CDs to
investors without a registration statement being in effect with
respect to such securities and while no exemption from
registration was applicable.
b. From at least September 1992 to December 1992,
Krueger willfully violated Section 5(a) of the Securities Act in
that, directly or indirectly, he made use of the means or
instruments of transportation or communication in interstate
commerce or of the mails, through the use or medium of a
prospectus or otherwise, to sell securities or carried or caused
to be carried through the mails or interstate commerce, by the
means or instruments of transportation, securities, for the
purpose of sale or delivery after sale, without a registration
statement being in effect with respect to such securities or
while no exemption from registration was applicable.
As part of this conduct, Krueger sold CTB CDs to
investors without a registration statement being in effect with
respect to such securities and while no exemption from
registration was applicable.
8.a. From at least February 1992 to December 1992,
Sylvester willfully violated Section 5(c) of the Securities Act
in that, directly or indirectly, he made use of the means or
instruments of transportation or communication in interstate
commerce or of the mails to offer to sell, through the use of a
prospectus or otherwise, securities, without a registration
statement being filed with respect to such securities and while
no exemption from registration was applicable.
As part of this conduct, Sylvester offered to sell
CTB CDs without a registration statement being filed with respect
to such securities and while no exemption from registration was
applicable.
b. From at least September 1992 to December 1992,
Krueger willfully violated Section 5(c) of the Securities Act in
that, directly or indirectly, he made use of the means or
instruments of transportation or communication in interstate
commerce or of the mails to offer to sell, through the use of a
prospectus or otherwise, securities, without a registration
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statement being filed with respect to such securities and while
no exemption from registration was applicable.
As part of this conduct, Krueger offered to sell
CTB CDs without a registration statement being filed with respect
to such securities and while no exemption from registration was
applicable.
III.
In view of the foregoing, the Commission finds that it is in
the public interest to impose the sanction specified in the Offer
of Settlement.
Accordingly, IT IS HEREBY ORDERED THAT:
Respondents Sylvester and Krueger be, and hereby are, barred
from association with any broker, dealer, investment company,
investment adviser, or municipal securities dealer.
For the Commission, by its Secretary, pursuant to delegated
authority,
Jonathan G. Katz
Secretary
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